The archived blog of the Project On Government Oversight (POGO).

Jun 25, 2012

Request DENIED: Army Refuses Legal Indemnification for KBR

By NEIL GORDON

POGO has obtained a document that sheds new light on the ongoing litigation between defense contractor KBR and National Guardsmen who claim the company exposed them to a deadly chemical at the Qarmat Ali water treatment plant in Iraq. The document could help the Guardsmen in their nearly four-year fight for justice and will come as good news to taxpayers, who stand to save potentially hundreds of millions of dollars.

POGO’s occasional blog posts about the Qarmat Ali lawsuits have focused on a formerly classified provision in KBR’s contract that obligates the government to indemnify KBR for all legal damages and expenses. With taxpayers ultimately footing the bill, we worry the indemnification provision gives KBR an incentive to perform the contract recklessly. Others, such as U.S. Senator Ron Wyden (D–Ore.), claim the provision is encouraging KBR to drag out the Qarmat Ali lawsuits while running up excessive legal expenses.

However, our concerns were alleviated when we received this letter through the Freedom of Information Act (FOIA). In the November 18, 2011 letter, U.S. Army contracting officer John Rogers informed KBR contracts manager Michael Morrow that the government will not indemnify KBR for the Qarmat Ali litigation.

As POGO blogged last month, KBR must meet certain conditions for indemnification, the most crucial of which is that the damages must result from an “unusually hazardous” risk. According to Rogers, the indemnification clause does not extend to the Qarmat Ali lawsuits because “[t]here appears to be nothing about the repair of a water injection facility which presents any such unusually hazardous risks.”

Whether he intended to or not, Rogers also helped bolster the plaintiffs’ case with this assessment of KBR’s contractual responsibilities:

KBR, as the subject matter expert in oil field issues, was responsible for assessing conditions at each site to which it was sent and taking appropriate action to prevent exposure of any personnel at the site to industrial and environmental hazards….KBR obviously understood this, as they moved out with corrective action without receiving prior consent from the contracting officer once they identified the hazards presented by the sodium dichromate at Qarmat Ali.

The Qarmat Ali litigation resumed last week with both sides in Oregon federal court fighting over expert witnesses. Trial in the Oregon lawsuit is scheduled to begin in October, a month after the scheduled start of trial in the Texas lawsuit.